I keep reading posts saying that once re prices come down a bit, folks will start buying because they will pereceive the prices as more reasonable or a bargain. This is just wishful thinking, not based in factual history.
If you understand the above information and apply the information to the sell side of the equation, you will realize that as prices go down, folks are less willing to buy, and prices fall farther and faster as a result. The crowd is afraid to buy because they do not know the true value of the asset, and only see the price and price movement.
The reversal comes when the knowledgeable investors, (professional traders), who know the actual value of the asset relative to other assets and income, start buying. Usually, this is when the general public decides the asset in question is a terrible investment.
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Your analysis is “right on” as usual. The falling prices = bargain theory is nonsense, and I really want people to see that. I hope more of the general public reading posts like this will change their thinking and not become bagholders.
Posted by Jwm in SD on 07/21/07 at 07:01 AM
That may be wishful thinking IR. I agree with everything you’ve said and have applied the stock market analogy myself. However, you will get a lot trolls posting here on how the RE market is not analogous to the Stock market....why, “because people live in their house and not their stock”. Another strawman argument will be that RE is not as liquid as a stock. I think both sides are right actually depending on their perspective.
The only differences I see really between the RE Market dynamics and the Stock market dynamics is the timeframe over which the trends manifest. It’s obviously much faster in the stock market....but an asset is an asset is an asset. Which one would you rather have right now?? One you can sell with a mouse click or one that might take several months???
A lot of people in SoCal are in for a rude surprise over the next several years. Specifically in OC.
“The only differences I see really between the RE Market dynamics and the Stock market dynamics is the timeframe over which the trends manifest.”
I totally agree with this statement for the reasons you mentioned.
I hope I am not engaging in wishful thinking. Several people have posted in our forum that we have saved them from making a bad purchase; although, I am afraid for the majority, you are right…
Posted by Jwm in SD on 07/21/07 at 07:21 AM
Probably true for the majority. I see it being the same thing that made J6Pck think he could be a daytrader back in the late nineties early 2000. He quickly figured out that he couldn’t do and lost his ass.
Posted by Irvine Soul Brother on 07/21/07 at 09:19 PM
What about when housing markets drop? Is there a known trend about the speed of a drop compared to the speed of the run up? Is one historically steeper than the other? By these arguments, it seems as though drops would occurs steeper. Is this line of inquiry too general, or is there a trend in this respect?
Posted by SoCalWatcher on 07/22/07 at 10:00 PM
That book excerpt is absolutely accurate, spot on, correct as can be. Amazing how greed and visions of Ben Franklins dancing in people’s heads clouds any rational due diligence when making a large purchase like a home or an investment property.
I am sure many got lucky and made a killing with little effort and lack of knowledge about what they were doing. The ones who go killed are the ones who will learn the business the hard way. I wonder how many of these instant housing millionaires who got lucky will get burned the next time they try to ride a wave and drown?
Posted by Jwm in SD on 07/23/07 at 11:07 AM
A lot of them most likely re-invested in 05 and 06 when it wasn’t abundantly clear that the bubble was going to burst.
Posted by Beinformed on 07/24/07 at 10:11 AM
To irvinerRenter, I enjoy your blog page and I agree with everything you state in it. I just thought you would like to also know that according to the MLS listing site (where all the supposedly legit homes for sale are put by realtors) states in RED and at the beginning of the site that ALL HOMES TO BE LISTED ON LIST SITE MUST HAVE A PHOTO, and I guess the MLS knew that realtors love caps! But my question is why are some realtors still not obeying this rule?
Beinformed
Posted by Sue on 08/15/07 at 08:03 AM
Survey finds optimism among homeowners
STAFF REPORT
A survey by Attorneys’ Title Insurance Fund suggests that the current Florida real estate market is rather Dickensian.
A survey by Attorneys’ Title Insurance Fund suggests that the current Florida real estate market is rather Dickensian.
The best of times: 63 percent of the 1,415 Florida homeowners surveyed by the big title insurance underwriter expect that the value of homes in their community will remain the same or rise in the next 12 months. Thirty-six percent think prices will rise, 37 percent that they will fall and 27 that they will stay the same.
The worst of times: 80 percent agreed that now is a bad time to be selling a home and worry about their ability to sell their property if they needed to.
Posted by awgee on 07/21/07 at 04:44 AM
I keep reading posts saying that once re prices come down a bit, folks will start buying because they will pereceive the prices as more reasonable or a bargain. This is just wishful thinking, not based in factual history.
If you understand the above information and apply the information to the sell side of the equation, you will realize that as prices go down, folks are less willing to buy, and prices fall farther and faster as a result. The crowd is afraid to buy because they do not know the true value of the asset, and only see the price and price movement.
The reversal comes when the knowledgeable investors, (professional traders), who know the actual value of the asset relative to other assets and income, start buying. Usually, this is when the general public decides the asset in question is a terrible investment.
-----
Posted by IrvineRenter on 07/21/07 at 06:39 AM
Your analysis is “right on” as usual. The falling prices = bargain theory is nonsense, and I really want people to see that. I hope more of the general public reading posts like this will change their thinking and not become bagholders.
Posted by Jwm in SD on 07/21/07 at 07:01 AM
That may be wishful thinking IR. I agree with everything you’ve said and have applied the stock market analogy myself. However, you will get a lot trolls posting here on how the RE market is not analogous to the Stock market....why, “because people live in their house and not their stock”. Another strawman argument will be that RE is not as liquid as a stock. I think both sides are right actually depending on their perspective.
The only differences I see really between the RE Market dynamics and the Stock market dynamics is the timeframe over which the trends manifest. It’s obviously much faster in the stock market....but an asset is an asset is an asset. Which one would you rather have right now?? One you can sell with a mouse click or one that might take several months???
A lot of people in SoCal are in for a rude surprise over the next several years. Specifically in OC.
Posted by IrvineRenter on 07/21/07 at 07:18 AM
“The only differences I see really between the RE Market dynamics and the Stock market dynamics is the timeframe over which the trends manifest.”
I totally agree with this statement for the reasons you mentioned.
I hope I am not engaging in wishful thinking. Several people have posted in our forum that we have saved them from making a bad purchase; although, I am afraid for the majority, you are right…
Posted by Jwm in SD on 07/21/07 at 07:21 AM
Probably true for the majority. I see it being the same thing that made J6Pck think he could be a daytrader back in the late nineties early 2000. He quickly figured out that he couldn’t do and lost his ass.
Posted by Irvine Soul Brother on 07/21/07 at 09:19 PM
What about when housing markets drop? Is there a known trend about the speed of a drop compared to the speed of the run up? Is one historically steeper than the other? By these arguments, it seems as though drops would occurs steeper. Is this line of inquiry too general, or is there a trend in this respect?
Posted by SoCalWatcher on 07/22/07 at 10:00 PM
That book excerpt is absolutely accurate, spot on, correct as can be. Amazing how greed and visions of Ben Franklins dancing in people’s heads clouds any rational due diligence when making a large purchase like a home or an investment property.
I am sure many got lucky and made a killing with little effort and lack of knowledge about what they were doing. The ones who go killed are the ones who will learn the business the hard way. I wonder how many of these instant housing millionaires who got lucky will get burned the next time they try to ride a wave and drown?
Posted by Jwm in SD on 07/23/07 at 11:07 AM
A lot of them most likely re-invested in 05 and 06 when it wasn’t abundantly clear that the bubble was going to burst.
Posted by Beinformed on 07/24/07 at 10:11 AM
To irvinerRenter, I enjoy your blog page and I agree with everything you state in it. I just thought you would like to also know that according to the MLS listing site (where all the supposedly legit homes for sale are put by realtors) states in RED and at the beginning of the site that ALL HOMES TO BE LISTED ON LIST SITE MUST HAVE A PHOTO, and I guess the MLS knew that realtors love caps! But my question is why are some realtors still not obeying this rule?
Beinformed
Posted by Sue on 08/15/07 at 08:03 AM
Survey finds optimism among homeowners
STAFF REPORT
A survey by Attorneys’ Title Insurance Fund suggests that the current Florida real estate market is rather Dickensian.
http://www.heraldtribune.com/article/20070814/REALESTATE/708140607
A survey by Attorneys’ Title Insurance Fund suggests that the current Florida real estate market is rather Dickensian.
The best of times: 63 percent of the 1,415 Florida homeowners surveyed by the big title insurance underwriter expect that the value of homes in their community will remain the same or rise in the next 12 months. Thirty-six percent think prices will rise, 37 percent that they will fall and 27 that they will stay the same.
The worst of times: 80 percent agreed that now is a bad time to be selling a home and worry about their ability to sell their property if they needed to.